WTO Members Tussle Over Size and Shape of Nairobi Package

24 September 2015

With WTO members still divided on farm subsidies and market access issues, Director-General Roberto Azevêdo last week called for negotiators to start focusing their efforts on “the most promising issues” for the global trade body’s upcoming ministerial conference in Nairobi, Kenya this December.

However, negotiators from both developed and developing countries expressed unease at proposals to refocus talks on a narrow package of relatively uncontroversial “deliverables” for the Nairobi event.

A statement from the WTO explained that Azevêdo was referring to “LDC and development outcomes, outcomes on export competition in agriculture, and a number of provisions to improve transparency in several issues being negotiated.” There is widespread consensus that – at a minimum – the ministerial must contribute to progress on issues of concern to least developed countries (LDCs).

Trade sources told Bridges that they would be disappointed if the trade talks failed to make progress on controversial topics such as farm subsidies or tariffs for agricultural and industrial products.

“Most members want a comprehensive package addressing everything,” one developed country official said.

Negotiations aimed at just such a package were launched as part of the WTO’s Doha Development Agenda (or DDA) in 2001, but hit an impasse after talks broke down in 2008. The organisation’s Bali ministerial conference two years ago gave a boost to the struggling trade round with a commitment to agree to a work programme on the remaining Doha issues, but the talks since have shown continued divides.

US proposes farm subsidy cuts

Azevêdo’s call for members to refocus talks on a small package of less controversial measures was echoed by US Ambassador Michael Punke at an informal consultation on 17 September.

“The United States continues to believe that we have a good possibility of achieving a package of meaningful outcomes for Nairobi and the DDA, centered around the export competition pillar of agriculture, meaningful steps forward on issues important to LDC members, and potentially some advances in transparency in several areas,” Punke told the meeting.

In previous years, the EU has insisted that any concessions on export subsidies and similar measures under the WTO’s “export competition” pillar should form part of an overall Doha deal rather than being fast-tracked as a separate accord.

But trade sources told Bridges that the 28-nation bloc might be willing to reconsider its long-standing opposition to an “early harvest” that included elements on export competition, in light of evolving market trends and the negotiating context.

Punke nonetheless told negotiators that the US had prepared a new proposal on agricultural domestic support, which he said took account of the “red lines” – or non-negotiable issues – that trading partners had told them about previously.

In contrast, the US said that WTO members “are simply nowhere near achieving multilateral consensus” on market access for agricultural and manufactured goods, nor on services.

Market price support and input subsidies

The informal US proposal – a copy of which has been seen by Bridges – was shared at a small-group consultation among chief negotiators from seven major trading powers on 15 and 16 September in Geneva.

Brazil, Canada, China, the EU, India, Japan, and the US attended the meeting, which was called by the WTO Director-General, trade sources said.

The document proposes that it is particularly important to strengthen disciplines on two kinds of trade-distorting domestic support, namely market price support and input subsidies.

The proposal does not suggest taking specific action on other kinds of payments, such as non-product specific support payments that would also fall into the WTO’s “amber box” – the organisation’s category for the most trade-distorting types of payments.

The draft text explicitly states that the proposed accord would be without prejudice to WTO members’ rights and obligations under Article 6.2 of the Agreement on Agriculture. This clause provides greater flexibility to developing countries to use input and investment subsidies – types of support which are particularly important in India. (See Bridges Weekly, 18 September 2014)

Standstill commitment

Members would agree that they “should avoid using market price support and input subsidies for agricultural products,” the new submission suggests.

They would also undertake a “standstill” commitment on either market price support or input subsidies. This could include agreeing not to increase the applied administered price for any farm products receiving market price support; not increasing the number of farm products benefitting from this kind of support; or not increasing product-specific input subsidies for agricultural products above existing levels.

Punke said the new proposal would not require any member to make changes to existing programmes that are WTO-consistent under current rules.

He also said that major subsidisers would have to answer one key question: “are [these countries] willing to search for any area where they can make a contribution to progress on this issue?”

In recent months, Washington has consistently argued that large developing countries such as China will need to agree to undertake cuts as part of any multilateral deal involving agricultural domestic support. (See Bridges Weekly, 25 June 2015)

Sceptical reactions

New Zealand Ambassador Vangelis Vitalis, the chair of the WTO agriculture negotiations, held a follow-up meeting with a larger number of negotiators yesterday afternoon, officials told Bridges.

However, trade officials told Bridges that they did not believe the proposal would receive a warm welcome from other countries.

“It won’t fly,” said one developing country negotiator, adding that China and India did not accept the US approach.

A developed country official concurred, suggesting that it was “no surprise” that these members had reacted critically to a proposal that focused on their own trade-distorting support programmes without also addressing the types of schemes in use in other major subsidisers.

A number of delegates also questioned whether introducing a new approach to disciplining trade-distorting support so soon before the ministerial conference would be helpful in garnering consensus among members.

“I think it makes it more difficult,” one official told Bridges.

An LDC package?

An African official also cautioned that many developing country groups would be reluctant to accept a Nairobi outcome built around “deliverables” for least developed countries, but with little to offer other developing countries that did not fall into this category.

The coalitions that were concerned about this included the G-33 group of developing countries with significant populations of small farmers, as well as the African, Caribbean and Pacific Group (ACP) and the African Group, the negotiator said.

Negotiators are now hoping that trade ministers from the G-20 group of major economies will give further guidance to the talks when they meet in Istanbul on 5 October.

The G-7 major trading powers were expected to meet in the margins of the event to try to identify ways forward in the talks, trade sources said.

However, trade officials were conscious that few weeks remain to identify the contours of a possible deal and start filling in the details.

“Time is short,” Azevêdo told negotiators late last week. “It is essential that we have an answer to this question within the next month.”

ICTSD reporting.

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